Hello
From reading alot of posts so far I can decipherer that being honest and providing as much information is the best practice so here goes.
I am not an accountant.
I run my own window cleaning company as a Self Employed trader. I am SE because my TO is below 30K and it keeps it very simple
My wife is a Director of a LTD company cleaning Solar Panels. although the turnover is less than 30k, the hope when the company was started that it would grow as the sector grows, but that hasn't materialised yet. Its a limited company because, its all commercial work so wanted to charge Vat, and therefore reclaim for COG etc etc and present professional image.
We used some of our own money and money borrowed alot from my dad to setup the business. However it was bulked in together almost 22k in total. and assigned as owner share capital 1 share = 22k. Chose not to assign 2nd director
after buying equipment specific to this work i.e Van etc and making first year loss of almost 6k, it left the company with net asset of 16k
Here comes the question.
We have always been very careful with our money, and have always managed to avoid claiming any money. However new child, and the need to subcontract more work out has meant a lowering in our income and increase in expense
However our current combined earnings and collective savings entitle us the receive housing benefit.
However the assets of the company are being counted as, miscellaneous savings @ 16k held against my wife because she is the company director.
Has the local authority worked that out correctly?
Would assigning it as a Director Loan Been a better idea
any other suggestions would be helpful
I have tried to convey this in such a manner that it doesn't sound like I am trying to cheat my way to benefits
Regards
Alex
and thank you
Replies (16)
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What I don't understand
The bit I don't understand (or perhaps the bit you don't understand) is where you say "We used some of our own money and money borrowed a lot from my dad to setup the business. However it was bulked in together almost 22k in total. and assigned as owner share capital 1 share = 22k."
That is not how these things are usually done. Usually the share capital would be quite small, perhaps £1 or £100, & the money would be put in as loans either from the director or from someone else (such as a bank or a director or a relative).
Are you sure the issued share capital is £22k?
Looking at this another way, it would appear that either the company or the director personally owes money to your father. Have you taken that debt into account in working out your assets for the Housing Benefit claim?
RM
DIY Job ?
Did you do this yourself, Alex ?
If you've issued one share at £22000, you've managed to tie up all this money - some of which isn't yours - in the company and it'll take some getting back.
It sounds to me as though the assets are being counted but not the liabilities. Are you sure you've completed the form correctly ? The money you've put in is probably correctly counted - one way or another - the money you've borrowed probably isn't.
You're going to need to see an accountant with a big spade to dig you out of the hole you've dug yourself into.
It doesn't make any difference to your housing benefit claim whether the £22k was all share capital or, at the other extreme, £1 share capital and £21,999 loan.
Either way, you put in £22k and lost £6k if it, so you have £16k left. But, as the previous posters say, how much is the loan from your father that you still have to repay, and are you sure it is being deducted properly?
Unless there was an error in the incorporation of the company, there is no "£2k to repay to us" as it is tied up in the undistributable Shares of the company.
The £15k owing to the father should really be deducted from the value of the share in calculating the net position re assets/savings.
Where do the repayments come from? (ie. Personal bank account or company bank account?)
You are not answering the key question about whether you have told the housing benefit people about the loan from your father. You say the net assets of the company are £16k (they are not inflated by the way - that is what they are) and you owe your father £15k. So there is only £1k of net value for the housing benefit people to take into account (apart from anything else you haven't told us about).
By the way, if all the £22k has gone in as share capital you can't take it out again until you close the company and liquidate it. So there is no "2K left to be repaid to us". Where has the £5k you have already paid to your father come from?
Loan
The money repaid is repaid from the company account,
And how is that money reflected in the company's accounts?
We have not told them about the loan from my dad.
Well that's the reason for your problem right there. If you tell them about your assets but keep your liabilities secret what do you expect?
I agree with you about the net asset value, just simply where or to whom that value is attributed to.
The value is attributed to the company's sole shareholder - your wife.
Loan
The reason the local authority think you've so much money is that you haven't told them about the £20000 you owe your dad. So they think you've £20000 more than you really have.
I'm glad you've had the sense to see an accountant about this. The basic error you made in setting up the company is to lock all the money in as share capital. If you'd had a nominal £1 as share capital, you could have withdrawn the other £21999 without penalty, as an when funds permitted. Nevertheless, there are solutions and the money won't be completely lost.
So your initial £22k in the company has come down by £6k to £16k by:
What you call repayment of capital - £5k
Net loss on trading - must be - £1k
Is that right?
If you didn't think that the loan from your father was your liability, whose liability did you think it was?
Why can you not give the housing benefit people the correct figures?
But if you thought that the company owed the money to your father, you didn't show it as a liability in the company's figures either - did you?
So you have written off the loan repayments to your father as an expense in your profit and loss account? That is obviously completely wrong. You haven't lost £5,725 at all - only £725.
Like I said, if you tell the housing benefit people about your assets but keep your liabilities a secret, how on earth do you expect them to see the true position?
The easiest solution is to provide the correct figures. The above £16,162 by the way is the balance of your loan to the company, or rather all but £1 of it is. It is not the company's net assets.
Sorry, mate, I agree with John.
Your accounts are just wrong, I'm afraid. You just haven't understood the difference between called up share capital and loans. Even through this thread. Your last post is the exact opposite of what you said at the start, despite it being challenged by runningmate in the first response.
You're probably going to have to resubmit the accounts to Companies House - and HMRC.
You're not alone in assuming that loan repayments are allowable for tax but you didn't think to pay tax on the original loan, did you ? As I said to another poster not so long ago, what an easy tax saving wheeze that would be .... borrow £20000, no tax, pay it back, get tax relief at 20% - £4000 better off at no cost. Let's do it every week .........
If .....
I didnt realized I had try to claim tax relief on the loan?
If you've deducted the repayments from profits - yes.
But - without trying to give offence - you've changed your facts more than once.